1. Field of the Invention
The present invention pertains to the evaluation of asset portfolios and is particularly applicable to evaluating portfolios of financial assets, such as mutual funds.
2. Description of the Related Art
The problem of portfolio analysis arises in a variety of different contexts. One of the most common is in connection with the management of a mutual fund. However, similar issues may arise when smaller portfolios are being managed.
One concern when managing a portfolio is the overall riskiness of the portfolio. While certain conventional measures exist for quantifying riskiness, the present inventors have discovered that such conventional measures often are not flexible enough to provide certain desirable information. In addition, the present inventors have recognized that conventional measures of portfolio riskiness often do not identify exactly where the portfolio is most vulnerable.
Related issues arise when one is attempting to manage a portfolio. For example, index funds typically try to track an identified index. Conventionally, index fund managers have attempted to match the proportionate makeup of the subject index. Unfortunately, the present inventors have discovered that this approach often can require an excessive number of transactions in order to effectively track the desired index.